Return on Ad Spend (ROAS): Why It’s the Most Important PPC Stat
At Rosewood we believe in a well-rounded marketing strategy. 99% of businesses need a website, and a combination of organic and paid marketing to drive traffic to it. Finding the right balance of each is different per business and depends on your marketing campaign goals.
If you run an online store, this blog is for you. We’re going to dive into ROAS, what it is, how to calculate it, how to set your benchmarks and what you should be aiming for.
What is ROAS?
Return on Ad Spend (ROAS) is the value of the sales generated via clicks through your ads. Your return on investment, but in this case specifically your return on ad spend. In order to get an accurate ROAS metric, you’ll need to have Conversion Tracking setup & enabled on your website via Google Ads Tags or the Facebook Pixel.
The Golden ROAS Rule
The golden rule in ROAS metrics is that for every $1 you spend; you want to make $2. This is an ROAS of 2.
How to Calculate Your ROAS?
Most platforms have an ROAS calculation built into them (Facebook Ads Manager and Google Ads). You can enable it but customizing your columns in the Ads Manager settings. To calculate manually, you take the value of the sales and divide it by the cost of the ads campaign.
ROAS = Sales / Spend
- Website Sales of $100
- Ad Spend of $20
- Calculate: 100/20
- ROAS = 5
Article Key Summary
- ROAS (Return on Ad Spend) is like ROI but specific to ads.
- Calculate ROAS = Sales / Spend
- Golden Rule: ROAS of 2 or more
- As long as your ROAS is positive, you want to keep spending money on your ads.
- If your ROAS is negative, reduce your spend and tweak your campaign until it’s positive.
If you have an online store, ROAS is the primary metric we recommend you track. Other metrics can be deceiving, such as Cost Per Click. This cost per click might be very high, but if it is translating into multi-item high-ticket sales and the ROAS is high – then it’s worth it.
For more information on Google Ads and Facebook/Instagram Ads, please reach out for a complimentary consultation. We love helping small businesses succeed!
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